Effect of Resource Variation and Firm Experience on Market Entry Decisions: Evidence from U.S. Telecommunication Firms' International Expansion Decisions

We consider the role that resource variation plays in affecting a firm's market entry decision. Resource variation, represented by amplitude, frequency, and unpredictability of change in market demand, has been shown to affect organizations' decisions and life chances, but there is little evidence of the effect of variation on entry decisions. We hypothesize that resource variation in a market reduces entry but that not all firms are equally deterred by variation. In particular, firm experience with entry in general and with the target market specifically moderate the overall effect of market variation on entry. Our analysis of foreign market entry by U.S. telecommunications firms from 1985 to 2000 indicates that variation does deter entry and that experience moderates this effect, though not all dimensions of variation have significant effects. These results inform our understanding of the effect of uncertainty on firms' behaviors, as well as factors impacting market entry decisions and how these decisions are affected by experience.

[1]  Jesper B. Sørensen,et al.  Aging, Obsolescence, and Organizational Innovation , 2000 .

[2]  Sol Levine,et al.  Exchange as a Conceptual Framework for the Study of Interorganizational Relationships , 1961 .

[3]  J. March,et al.  A Behavioral Theory of the Firm , 1964 .

[4]  M. Tushman,et al.  Organizational Environments and Industry Exit: the Effects of Uncertainty, Munificence and Complexity , 2001 .

[5]  S. Zeger,et al.  Longitudinal data analysis using generalized linear models , 1986 .

[6]  Gerald W. Brock.  Telecommunication Policy for the Information Age: From Monopoly to Competition , 1998 .

[7]  Andrew Delios,et al.  Uncertainty, Imitation, and Plant Location: Japanese Multinational Corporations, 1990‐1996 , 2001 .

[8]  L. Cronbach.  Statistical tests for moderator variables: flaws in analyses recently proposed , 1987 .

[9]  Heather A. Haveman.  Follow the leader: Mimetic isomorphism and entry into new markets , 1993 .

[10]  Glenn R. Carroll,et al.  Size (and competition) among organizations: modeling scale‐based selection among automobile producers in four major countries, 1885–1981 , 2003 .

[11]  M. Erramilli.  The Experience Factor in Foreign Market Entry Behavior of Service Firms , 1991 .

[12]  Heather A. Haveman,et al.  Competition in Multiple Geographic Markets: The Impact on Growth and Market Entry , 2000 .

[13]  P. J. Huber.  The behavior of maximum likelihood estimates under nonstandard conditions , 1967 .

[14]  Mauro F. Guillén,et al.  Structural Inertia, Imitation, and Foreign Expansion: South Korean Firms and Business Groups in China, 1987–1995 , 2002 .

[15]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[16]  Daniel A. Levinthal,et al.  Looking Forward and Looking Backward: Cognitive and Experiential Search , 2000 .

[17]  K. Sutcliffe.  What Executives Notice: Accurate Perceptions in Top Management Teams , 1994 .

[18]  H. White.  A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity , 1980 .

[19]  James D. Thompson.  Organizations in Action , 1967 .

[20]  R. Duncan.  Characteristics of Organizational Environments and Perceived Environmental Uncertainty. , 1972 .

[21]  Jeffrey M. Wooldridge,et al.  Solutions Manual and Supplementary Materials for Econometric Analysis of Cross Section and Panel Data , 2003 .

[22]  Gerald W. Brock.  The Telecommunications Industry: The Dynamics of Market Structure , 1981 .

[23]  Jacques Delacroix,et al.  Cosmetic, Speculative, and Adaptive Organizational Change in the Wine Industry: A Longitudinal Study , 1991 .

[24]  Jiatao Li.  Foreign entry and survival: effects of strategic choices on performance in international markets , 1995 .

[25]  J. Stewart,et al.  Den of Thieves , 1992 .

[26]  Will Mitchell,et al.  THE EFFECT OF OWN-FIRM AND OTHER-FIRM EXPERIENCE ON FOREIGN DIRECT INVESTMENT SURVIVAL IN THE UNITED STATES, 1987-92 , 1997 .

[27]  J. Jaccard,et al.  Interaction effects in multiple regression , 1992 .

[28]  A. Cooper,et al.  The role of firm resources and organizational attributes in determining entry timing: a cross-industry study , 1998 .

[29]  Terry L. Amburgey,et al.  Strategic momentum: The effects of repetitive, positional, and contextual momentum on merger activity , 1992 .

[30]  S. West,et al.  Multiple Regression: Testing and Interpreting Interactions. , 1994 .

[31]  M. Guillén,et al.  Experience, imitation, and the sequence of foreign entry: wholly owned and joint-venture manufacturing by South Korean firms and business groups in China, 1987–1995 , 2003 .

[32]  Gregory G. Dess,et al.  Dimensions of Organizational Task Environments. , 1984 .

[33]  Joel A. C. Baum,et al.  Chance, Imitative, and Strategic Antecedents to Multimarket Contact , 1999 .

[34]  J. Child.  Organizational Structure, Environment and Performance: The Role of Strategic Choice , 1972 .

[35]  P. T. Spiller,et al.  The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation , 1994 .

[36]  S. Grubaugh.  Determinants of Direct Foreign Investment , 1987 .

[37]  H. Barkema,et al.  FOREIGN ENTRY, CULTURAL BARRIERS, AND LEARNING , 1996 .

[38]  Henrich R. Greve,et al.  Marketing Niche Entry Decisions: Competition, Learning, and Strategy in Tokyo Banking, 1894–1936 , 2000 .

[39]  Robert W. Crandall,et al.  Talk is Cheap: The Promise of Regulatory Reform in North American Telecommunications , 1996 .

[40]  W. Mitchell.  Whether and When? Probability and Timing of Incumbents' Entry into Emerging Industrial Subfields , 1989 .

[41]  Douglas R. Wholey,et al.  CHARACTERIZING ENVIRONMENTAL VARIATION , 1989 .

[42]  Anand Swaminathan,et al.  Organizational Evolution in the interorganizational Environment: Incentives and Constraints on International Expansion Strategy , 1998 .

[43]  Andrew Delios,et al.  Political Hazards, Experience and Sequential Entry Strategies: The International Expansion of Japanese Firms, 1980-1998 , 2003 .

[44]  H. Simon,et al.  Strategy and organizational evolution , 1993 .

[45]  Sea Jin Chang,et al.  AN EVOLUTIONARY PERSPECTIVE ON DIVERSIFICATION AND CORPORATE RESTRUCTURING: ENTRY, EXIT, AND ECONOMIC PERFORMANCE DURING 1981–89 , 1996 .

[46]  Henrich R. Greve,et al.  An Ecological Theory of Spatial Evolution: Local Density Dependence in Tokyo Banking, 1894-1936 , 2002 .

[47]  Robert W. Crandall,et al.  After the Breakup : U.S. Telecommunications in a More Competitive Era , 1991 .

[48]  Michael T. Hannan,et al.  Niche Width and the Dynamics of Organizational Populations , 1983, American Journal of Sociology.

[49]  J. Walsh.  Managerial and Organizational Cognition: Notes from a Trip Down Memory Lane , 1995 .

[50]  K. Weick.  FROM SENSEMAKING IN ORGANIZATIONS , 2021, The New Economic Sociology.

[51]  L. Bourgeois.  STRATEGIC GOALS, PERCEIVED UNCERTAINTY, AND ECONOMIC PERFORMANCE IN VOLATILE ENVIRONMENTS , 1985 .

[52]  Sea Jin Chang,et al.  International Expansion Strategy of Japanese Firms: Capability Building through Sequential Entry , 1995 .